LINGERING EFFECTS GROCERS LOST MONEY, WORKERS LOST PAY, SOME ANGRY SHOPPERS CAN'T BE LURED BACK.

Byline: Nicholas Grudin Staff Writer

Three months after the end of the historic supermarket strike that jolted Southern California's grocery industry, the dust is settling and a dramatically changed landscape has emerged.

Industry experts estimate that Vons, Ralphs and Albertsons have lost an average of 10 percent of their regional business, with alternative grocers such as Trader Joe's and Smart & Final making inroads into the formerly big-chain-dominated market.

Some shoppers say they will never return to their former habits, and workers complain that the contract they agreed to is breeding bitterness in the work place.

``The impact is far greater than any of the companies would have imagined on Oct. 10, 2003,'' said Greg Denier, spokesman for the United Food and Commercial Workers International Union. Nearly 60,000 of its members walked out or were locked out of supermarkets and picketed for the next 139 days. Another 10,000 covered by the contract remained on the job at stores that agreed to whatever agreement was reached.

``They did not anticipate the commitment of workers on the picket lines or the consumer support. I don't think Vons or (Safeway Chief Executive) Steve Burd in any way anticipated the aftershock to his actions.''

Nonetheless, the big three chains appear headstrong in their approach to similar labor disputes throughout the nation, most immediately in Seattle and San Francisco.

Company officials - including Burd, who was singled out by the union - argue that a consistent recovery is under way.

``We see a steady flow of customers returning week after week. Employees are getting back to business as usual,'' said Vons spokeswoman Sandra Calderon.

The grocery strike, which ended Feb. 29 with approval of a new three-year contract, was the longest and largest in the history of the industry, costing the three chains more than $1 billion. It is now being viewed as the benchmark battle for labor strife that is percolating throughout the nation due to rising health care costs, including the simmering dispute between the Communication Workers of America and telephone giant SBC.

``Overall this has really elevated the health care crisis regionally and nationally,'' said Kent Wong, director of the UCLA Center for Labor Research and Education. ``There's a massive campaign by the employer community to try to prevent employer-based health care. ... People are looking at what happened with the supermarket workers and trying to learn lessons from that.''

In the aisles

To the naked eye, not all that much has changed in the aisles of your corner Ralphs or Vons, except that the lines might be a bit shorter than they used to be.

Some shoppers, like Carol Hopping of La Verne, quickly returned to her Vons routine.

``I just came back to this store because it's close to home - I came back the first day after the strike ended,'' said Hopping, loading her car full of groceries. ``I tried going somewhere else, but this one is the closest to home and it's got everything I need.''

But a different story is told in the crowded parking lot of stores like Smart & Final, Trader Joe's, Costco and a Long Beach Bristol Farms store, where sales spiked dramatically during the strike, and have remained elevated since.

``It was definitely more crowded during the strike, and it's definitely more crowded now,'' said shopper Karen Hartford.

At an Irwindale Costco, Sheree Carlson, a mother of six from West Covina, loaded her trunk with 12 cans of tuna, two gallons of milk and 60 Eggo waffles, among other things.

``Since the beginning, it was a Stater Bros. freak-out - nowhere else,'' Carlson said. ``Now I'm coming here. The strike was on so it made sense to try it out.''

``(The big chains) really screwed themselves,'' said Maria Jones, shopping at a Valencia Trader Joe's. ``Vons was my favorite store, and they really disappointed me. ... I go back for little things, but I predominantly don't go.''

Shoppers aren't the only ones still holding a grudge.

Veteran clerks are witnessing the implementation of a contract they were never content with. New hires, now on a lower pay scale, are quickly infiltrating the work force and taking hours from more experienced workers, clerks say. Moreover, the losses in health benefits are already apparent.

``We got robbed blind on our benefits and we still work as hard as ever,'' said Sherry Rupert, a Pavilions clerk.

On paper

The anecdotal evidence is supported by the most recent earnings reports for Safeway Inc. - Vons and Pavilion's parent company - and several smaller grocery stores.

In early May, Safeway posted a 73 percent plunge in first-quarter profits. Although the bulk of the losses were attributed to the final two months of the strike, Safeway chief executive Steve Burd said a slowdown is anticipated to last through the second and third quarters as well.

However, Burd added that the company is stabilizing because many striking workers did not return to work and were not replaced.

``The revenues are down, but the cost structure is down, too,'' said Andrew Wolf, a grocery industry analyst for BB & T Capital in Virginia.

Conversely, recent earnings reports for Gelson's, Whole Foods and Stater Bros., all smaller grocers with strong presence in Southern California, showed earnings gains above and beyond analysts' predictions.

In the first quarter of 2004, Whole Foods profits leapt about 40 percent and Gelson's parent company, the Arden Group, revealed a 48 percent leap in sales.

The most astounding figures were revealed May 14, when Stater Bros. - which has 158 stores in Southern California - revealed a 700 percent leap in net income from their second quarter of 2003 to the second quarter of 2004.

``One of the things that the strike developed was that it took customers who regularly shopped at a supermarket and it turned them into shoppers, who were looking to anyplace that could help meet their shopping needs. And they seem to be continuing that pattern of shopping at two to three stores, rather than the one they used to,'' said Stater Bros. chief executive Jack Brown.

Industry's future

During the strike, Ralphs, Vons and Albertsons used the rationale that the impending construction of 40 Wal-Mart Supercenters in Southern California is forcing them to cut employment costs. What they may not have counted on is that smaller independent stores, with increased value and selection, would make for equally tough competition.

Prior to the strike, the big three chains made up about 60 percent of the Southern California market share. According to Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., that number has diminished.

``Sixty percent is pretty heavily concentrated for three stores. And now, it's definitely gone down,'' Kyser said.

The difference in market share has inevitably shifted to the smaller grocers.

``If the supermarkets are down 15 percent in total, somebody's got to be up all of that because people are not starving, fishing or eating road kill,'' said Andrew Wolf.

Phil Lempert, editor of Supermarketguru.com, agreed, but added that the permanent effects of the strike are still unknown.

``Vons, Ralphs and Albertsons lost a certain amount of customers, but we won't know for sure for about a year,'' Lempert said.

Brown of Stater Bros. said a full recovery should be expected.

``As time goes by, they'll continue to develop programs to try to win back all of their customers. That's just the nature of the supermarket industry.''

However, that's assuming that the near future does not involve more significant labor strife. Local union leaders claim the ratified contract is not being implemented the way they envisioned.

``It's ugly, it isn't business as usual,'' said Rick Icaza, president of UFCW Local 770, the largest local involved in the strike. ``It's devastating what they're doing with this two-tier system. We're going to have to build up the troops for three years from now.''

This is the same mind set taking hold of union leaders in San Francisco, Seattle, and elsewhere throughout the nation, as labor contracts expire and company executives look to the Southern California settlement for guidance.

``We are in bargaining here with the same three employers,'' said Geralyn Lutty, director for the Northwest region of the UFCW, who is currently in negotiations with Seattle grocery stores.

``The bargaining is very tough. The proposals on the table are totally concessionary and (the supermarkets') key goals are to eliminate affordable health care. In that regard, it's very similar to where they were in Southern California. But the strike hasn't intimidated our folks, it's just inspired them.''

Shoppers like Norman Kurtzman, at a West Los Angeles Smart & Final store, were inspired, too, by the strike.

``I never used to come here and then all of a sudden I discovered it, and it's convenient. I used to just go to the local Ralphs and get whatever they carried, but the strike changed my shopping habits.''

Nicholas Grudin, [phone]

nicholas.grudin(at)dailynews.com

CAPTION(S):

7 photos

Photo:

(1 -- color) A sign in a Ralphs window announces the search for replacement workers as the strike looms.

(2 -- color) A locked out Ralphs employee stands in front of a delivery truck.

(3 -- color) Dolores Zaldivar pickets a Calabasas Albertsons with her baby.

(4 -- color) Very few shoppers ventured into this Vons in Canyon Country.

(5 -- color) Karina Benavides, left and Denise Cole, both clerks at a Van Nuys Ralphs, read a fact sheet before voting on a contract offer.

(6 -- color) Grocery workers crowd Valley College in Valley Glen to begin voting on a contract offer.

(7 -- color) A shopper returns to this Albertsons in Upland.